The greatest wealth transfer in modern history is about to get underway. And you’re a part of it, either as a giver or receiver.
Americans age 70 and above currently hold about $35 trillion (with a ‘t’) of financial and real estate assets. As this chart shows, they’ll parcel that out over the next 25 years. It’ll be for end-of-life care, to heirs, and charities. You have some choices about how to shape that.
For our purposes here, we won’t be talking ‘trillions.’ Our focus is on what you can do if you’re one of those individuals with up to $5 million, or a couple with up to $11 million worth of financial and real estate assets. Those are the thresholds at which estate taxes come into play. Yes, that may change by 2025, but we don’t speculate about politics. We work with what’s so.
👉 So, here’s the first point: Unless your household wealth exceeds $5 million per person or $11 million for a couple, the estate tax your heirs will pay is zero, at least to 2025. We’ll update this as actual legislation unfolds.
Most people are surprised to learn that they can give away much of their wealth during their lifetimes without incurring gift or estate taxes. This is encouraging because those with assets to give away can experience of the joy of that while still alive! And those who receive the assets can use them now rather than later.
👉 Second point. There are a number of ways to make effective and efficient transfers of wealth while you're still alive. Some examples are donor-advised funds, qualified charitable donations, 529 plans, life insurance, annuities, and outright gifts.
Study after study has shown that families struggle with passing on wealth to their children. Parents fear their children may end up “spoiled” and generally naïve about the importance of work and the value of money. And it often gets more complicated in blended families.
The concern is further amplified by discussing the size of a potential inheritance. Conversely, lack of communication can generate a “surprise” for the recipient at how large or small an inheritance turns out to be.
👉 Final point. As uncomfortable as it might seem, having “the talk” is really the best way to move through this situation. We are ready and willing to facilitate those conversations. We’ll focus on the purpose, practice, and people who can help make the process easier.
Purpose is more about passing values than passing value. Practice involves the methods, techniques, and details of estate planning. And people are those you’ve engaged with to help carry you through the details.
We are among the people. Let us know how we can help.
Jim Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315
Helpful Resources from reader RW:
What to Do With Everything You Own to Leave the Legacy You Want
Marni Jameson
Checklist for My Family: A Guide to My History, Financial Plans, and Final Wishes
Sally Baich Hurme
The forms in the book can be downloaded at www.ambar.org/AARPforms
Checklist for Family Survivors: A Guide to Practical and Legal Matters When Someone You Love Dies
Sally Baich Hurme
A template for writing a "last letter" to loved ones is at www.med.stanford.edu/letter/friendsandfamily
